AO World agrees to buy musicMagpie for £10 million

A gadget reseller sold to public market investors at a valuation of more than £200 million has been taken over by AO World for less than £10 million as the City continues to take losseson the ill-fated floats of 2021.
AO World has agreed to buy electronics business musicMagpie for 9.07p a share after its market valuation slumped in the years after its market debut three years ago when its listed for 193p a share. The business was founded by Steve Oliver and Walter Gleeson in 2007 to sell second-hand CDs, DVDs, games and books in the UK and the US, seeking to capitalise on consumer demand for recycled products and eco-friendly retailing.
Yet, musicMagpie said on Wednesday that it had faces a “challenging” economic environment following its market debut in April 2021, as consumer spending was restricted by rising energy costs and higher interest rates. The company increased the number of subscribers for its rental services from 4,400 to 32,700, but said it was merging with AO World to improve its “financial strength”.
The flotation market boomed in the year after the pandemic as more then 100 companies listed, but a subsequent collapse in value for some high-profile names has created reputational damage for the City. Bankers and private equity advisers have been trying to resuscitate listings in London, but have found that institutional investors are more demanding with candidates, and are looking to back only high-quality assets. City sources have said high-profile cases of stock market decline have weighed on sentiment, such as Dr Martens, Made.com, InTheStyle, Revolution Beauty and Deliveroo, with one banker describing the vintage as “scar tissue” for London investors.
AO World’s offer represents a premium of 58 per cent to musicMagpie’s most recent closing share price and will hand Oliver, who holds a stake of 11.19 per cent, a payout worth about £1.1 million, on top of the £12.3 million he made from selling shares in the float. Peel Hunt, Shore Capital and Deloitte advised on musicMagpie’s market debut, sharing in a total fee pot of £11.2 million.
John Roberts, chief executive of AO World, said: “To achieve our strategic ambition of becoming the destination for electricals, it is crucial for AO World to enhance its consumer tech offering.
“I am excited to welcome Steve and the musicMagpie team into the AO family and to realise the potential that our combined efforts can unlock.”
AO World has secured backing for the deal from directors and investors holding 54 per cent of musicMagpie’s issued share capital.
Oliver said: “AO is a highly trusted consumer brand that shares our commitment to providing a first-rate service for customers. I am very proud of the musicMagpie business and the trusted brand that we have created, providing consumers with a smart, sustainable and trusted way to buy, rent and sell refurbished consumer technology and physical media products.”
The UK market has seen just eight listings in the year so far, according to recent data from Dealogic, down from a total of 18 in the first nine months of 2023.
Samuel Kerr, global head of ECM at ION Analytics, said: “After two strong quarters in global equity capital market, activity slowed in the third quarter, with fewer IPOs compared to the same period in 2022 and 2023.
“The slowing in deal flow coincided with an uptick in equity market volatility in August and nerves around this year’s snap French elections alongside the upcoming US elections. With global interest rates now falling, there is further impetus for equity deals, but dealmakers and investors alike are keeping a close eye on the November polls.”